Morning Commentary: WeWork bonds jump 3 points on IPO buzz; junk stages improvement

By Paul A. Harris

Portland, Ore., Aug. 15 – Unexpected growth in July retail sales, reported Thursday by the Commerce Department, generated lift in the high-yield market, a New York-based bond trader said.

High-yield might have been up, generically, 1/8 to ¼ point at mid-morning, the trader said, but specified that it was very much a name-by-name situation, with plenty of decliners to go with the gainers.

Workplace specialist WeWork Cos. Inc. lit up screens Thursday morning, with the WeWork 7 7/8% senior notes due 2025 up 3 points at 104¾ bid.

The trader sensed a “massive short squeeze” at play but added that the company’s Wednesday IPO filing appears to be getting a warm reception, especially as the company is expected to follow it with a big debt offering, proceeds from which might ultimately address that 2025 maturity.

Its IPO news notwithstanding, on Wednesday WeWork also disclosed a $900 million loss on revenues of $1.54 billion in the first six months of 2019.

Among recent issues, the Freeport-McMoRan Inc. 5% senior notes due September 2027 (Ba1/BB/BB+) were down 1/8 point in active trading on Thursday, at 97 1/8 bid.

The $600 million tranche priced at par on Aug. 1.

The Tenet Healthcare Corp. 4 5/8% senior secured first-lien notes due September 2024 (Ba3/BB-) were up 3/8 point at 101 1/8 bid Thursday morning.

The $600 million tranche priced at par on Monday as part of a $4.2 billion megadeal that also included 4 7/8% notes due January 2026 and 5 1/8% notes due November 2027.

Tenet was the most recent deal to clear the junk new issue market.

And it might be the last deal of summer, as liquidity is expected to thin dramatically during the run-up to the extended Labor Day holiday weekend and as ongoing market turbulence casts an unfriendly light on the new issue bourse, sources say.

The Thursday session saw Gaming & Leisure Properties Inc. bring a benchmark offering of split-rated senior notes (expected ratings Ba1/BBB-/BBB-) in two tranches: five-year notes and long 10-year notes maturing in January 2030.

Its expected Ba1 rating from Moody's notwithstanding, the deal, coming in an investment-grade execution, did not appear to be generating much interest on the high-yield side, sources said.

Big ETF outflows

High-yield ETFs saw daily cash outflows of $756 million on Wednesday, according to a market source.

Actively managed high-yield funds, the asset managers, were flat to slightly positive on the day, with $10 million of inflows.

As the market awaits a weekly report from Lipper US Fund Flows, expected Thursday afternoon, the combined high-yield funds are tracking $755 million of net outflows for the week to Wednesday’s close.

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